Amazon Adding Digital Music Copies to CDs Bought Via Web

The "Dark Side of the Moon" by Pink Floyd. Photographer: Chris Ratcliffe/Bloomberg

Jan. 10 (Bloomberg) -- Amazon.com Inc., the largest online
retailer, will offer users free digital copies of CDs bought on
its site, as it competes with Apple Inc. and Google Inc. to
attract music lovers choosing to store their songs on the Web.

The new service, called Amazon AutoRip, gives access to MP3
versions of tracks from an initial batch of 50,000 albums,
including “Overexposed” by Maroon 5 and Pink Floyd’s “The
Dark Side of the Moon,” Amazon said today in a statement. The
service is retroactive, so anyone who has bought CDs from Amazon
since it started selling music in 1998 can claim a copy.

While Amazon was the first company to move music to the
cloud -- storing content on the Internet for access on any
device -- its Cloud Player is still trailing Apple’s iTunes and
has new rivals in Google and Spotify Inc. In the second quarter,
Apple had 64 percent of the market for digital music, compared
with 16 percent for Amazon and 5 percent for Google, according
to research firm NPD Group Inc.

“We’ve known for a while that there is kind of a hole in
the customer experience,” Steve Boom, vice president of digital
music at Amazon, said in an interview. “A lot of the music
people are putting in the cloud is music that they ripped from
CDs. We’re providing a service that’s reducing friction.”

Digital Books

The effort may foreshadow a similar option for e-books,
said Scott Devitt, an analyst at Morgan Stanley. Amazon, which
makes Kindle electronic readers and tablets, could profit from
paying publishers a subsidy to make a digital copy of all the
books available on its online store, he said.

“Having a digital library that is accessible only on the
Kindle platform essentially locks a customer into the Kindle
ecosystem forever,” he wrote today in a note to clients. “If
executed, it would possibly be the largest coup in company
history.”

Seattle-based Amazon has spent much of the past year making
sure Cloud Player users can access music from more devices --
phones and tablets -- and more platforms, including Google’s
Android and Apple’s iOS. The online retailer also made it
possible to listen to music on Roku Inc. boxes and Samsung
Electronics Co.’s televisions, and for customers to import music
into their Amazon libraries from iTunes and Microsoft Corp.’s
Windows Media Player.

Spotify’s Rise

Still, there’s plenty of competition. Spotify, which lets
users access music without owning it for a monthly fee, is
taking share away from Apple, and the model is something Amazon
and Google should emulate, said Brian Blair, an analyst at Wedge
Partners Corp. in New York.

“Amazon has done a decent job, but Spotify is disrupting
iTunes a little bit everyday,” Blair said. “Amazon Cloud
Player, Google Play -- I’ve seen no evidence that suggests
you’re seeing a migration of users away from iTunes to those
services.”

The e-commerce company worked with “major” record labels
to create AutoRip, Boom said. By giving users digital content
they didn’t previously have, there’s less incentive to download
illegal music, giving labels a reason to join, he said. Amazon
will focus mostly on new releases and popular albums as more
titles are added going forward, Boom said.

The digital copies of CDs are stored for free in users’
Amazon Cloud Player libraries and don’t count toward storage
limits. While customers can legally make a copy of any CD
they’ve bought, Amazon’s developers worked to match the digital
music available in its MP3 store to physical CDs for sale to
make it easier, Boom said.